https://www.thirdandstate.org/
enGraham-Cassidy Repeal Bill — Just Plain Bad for Pennsylvania https://www.thirdandstate.org/2017/september/graham-cassidy-repeal-bill-%E2%80%94-just-plain-bad-pennsylvania
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<p><em>As I write this, it is possible that the Graham-Cassidy bill to repeal the Affordable Care Act and make major changes to the traditional Medicaid program is already dying or dead. Two Republican members of the Senate, McCain of Arizona and Paul of Kentucky, have said they will vote against it. Senator Collins of Maine has announced that she is leaning against it. I’m hopeful that Senator Murkowski of Alaska will all announce that she is against it. And when that happens, I expect a substantial group of Senators will join them because this bill is truly dangerous to every state and the only reason it is even being considered is that Senate Republicans fear the short-term political costs of <a href="https://www.nytimes.com/2017/09/22/us/politics/republican-donors-obamacare-repeal.html?hp&amp;action=click&amp;pgtype=Homepage&amp;clickSource=story-heading&amp;module=first-column-region&amp;region=top-news&amp;WT.nav=top-news&amp;_r=0">disappointing their base voters and funders</a> more than they fear the long-term costs of doing great harm to their constituents. Once it is clear that there is no path forward to passing the bill, there will be no short term benefit to voting for it.</em></p>
<p><em>But first we have to kill it. If you live in Pennsylvania, that means calling Senator Toomey at (202) 224-4254 and then taking part in one of the efforts to encourage citizens in states with Senators who have not committed to voting no to call them. You can use this <a href="https://www.trumpcareten.org/calls-to-kill-trumpcare">tool</a>&nbsp;to do that.</em></p>
<p>The Graham-Cassidy bill is the latest Senate Republican attempt to not only repeal the Affordable Care Act, but also to radically transform the traditional Medicaid program. Like all the other efforts, it will lead to deep cuts in federal funding for health care to all states including to Pennsylvania, and will lead to large numbers of people losing their health insurance. Many of the details of the legislation have become known, but here we want to provide details about the impact on Pennsylvania.</p>
<p>The first short-term impact of Graham-Cassidy is to repeal the ACA marketplace subsidies and Medicaid expansion. This would eliminate the infrastructure under which Pennsylvanians secure insurance (and subsidies for that insurance) in the federally-run marketplace. In place of these provisions of the ACA, Graham-Cassidy provides block grants to the states to pay for a substitute for the ACA programs. However, not only is $243 billion less provided to the states between 2020 and 2026 than under the ACA, but the funding mechanism for those block grants directs more money towards states that did not expand Medicaid, like Pennsylvania, than those that did so. The result is that in 2026, Pennsylvania will <a href="https://www.cbpp.org/research/health/like-other-aca-repeal-bills-cassidy-graham-plan-would-add-millions-to-uninsured#health9-13-17table1">lose, at a minimum $850 million in federal funding</a>. And from <a href="http://avalere.com/expertise/life-sciences/insights/graham-cassidy-heller-johnson-bill-would-reduce-federal-funding-to-sta">2020 to 2026, the total loss in federal funds will be about $6 billion.</a> (The loss in federal funds could be even higher. Because part of the Graham-Cassidy plan is to replace the Medicaid entitlement with a per-capita cap, the bill, unlike current law, provides no additional guaranteed federal funding if a natural disaster, epidemic, or medical breakthrough leads to higher Medicaid costs.)</p>
<p>It is difficult to estimate the impact on the number of insured in Pennsylvania because we don’t know exactly how Pennsylvania would use the block grant money. The state would have to set up its own system for using that money to do some combination of limiting the consequences of the cutback to traditional Medicaid, keeping part of the Medicaid expansion, and subsidizing private insurance (and it would have to do all of this with less money than is used for these purposes under the ACA.) And that assumes that our dysfunctional General Assembly could agree with Governor Wolf or the next governor to actually replace the ACA. Given the current impasse, in which extremists Republican House members are blocking serious bipartisan negotiations on how to pay for our budget, no one should have any confidence that a reasonable health care proposal would be created in Pennsylvania.</p>
<p>Our best estimate is that simply because of the loss of funds, at least 150,000 and perhaps as many as 300,000 Pennsylvanians would lose insurance by 2026.</p>
<p>The costs of Graham-Cassidy become much deeper in 2027 and after because the block grant meant to replace ACA funds is eliminated while the per capita caps cut more deeply into federal funds for Medicaid. From 2027 to 2036 Pennsylvania will lose roughly $125 billion dollars or on average $16 billion per year in federal funding. Given our budget difficulties, no one should expect that any of that funding will be replaced with state dollars.</p>
<p>The impact of this loss of funding will be devastating. <a href="https://www.americanprogress.org/issues/healthcare/news/2017/09/20/439277/coverage-losses-state-graham-cassidy-bill-repeal-aca/">Analysts from the Center on American Progress estimates that 1.1 million</a> Pennsylvanians will lose their insurance. We have previously pointed out that <a href="https://www.thirdandstate.org/2017/july/new-estimates-loss-federal-funding-pennsylvania-senate-health-care-bill">CAP estimates for Pennsylvania for legislation not quite as draconian as Graham-Cassidy were low</a>. So our best estimate is that at least 1.3 million and possibly 1.5 million Pennsylvanians will lose health insurance by 2027, with the number increasing slightly over time. Over thirty million will lose health insurance nationwide.</p>
<p align="left">Losing federal funds for ACA programs and Medicaid will, by itself, create a great deal of pain and suffering and <a href="https://www.thirdandstate.org/2017/june/memo-effects-us-senate-health-care-bill-pennsylvania">between 900 and 4000 premature deaths</a> in Pennsylvania. But there are costs, as well, to those who benefit from other provisions of the ACA. The Cassidy-Graham bill would let states waive the ACA’s prohibition on charging people with pre-existing conditions higher premiums, as well as its essential health benefit requirements. If Pennsylvania did this, people with pre-existing conditions might not be able to purchase affordable coverage at all and many health insurance plans would exclude pre-existing conditions or services like maternity care and substance abuse treatment.</p>
<p>And like prior Republican bills, Cassidy-Graham specifically targets access to women’s health care services by barring states from reimbursing Planned Parenthood for preventive health and family planning services for people enrolled in Medicaid.</p>
<p>The Graham-Cassidy bill is a disaster for Pennsylvania, as well as for the rest of the country. It is imperative that it be stopped.</p>
https://www.thirdandstate.org/2017/september/graham-cassidy-repeal-bill-%E2%80%94-just-plain-bad-pennsylvania#commentsHealth CareSat, 23 Sep 2017 02:09:41 +0000Marc Stier1595 at https://www.thirdandstate.orgThe Budget Solution We Needhttps://www.thirdandstate.org/2017/september/budget-solution-we-need
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<p>It appears that the Pennsylvania Senate is about to vote to not concur with the recently-passed House bill to fund this year’s budget. That will set the stage for what will certainly be intense negotiations among the four legislative caucuses and Governor Wolf about a compromise bill. We hope these negotiations will be completed quickly, as the state is already delaying payments to the pension funds and Medicaid managed care organizations and the state is getting very close to a credit down grade that will cost hundreds of millions over the next few years. (And keep in mind that, just like a household cannot fix its credit rating over night after a financial faux pas, a state cannot do so either. A credit down grade will cost the state, county and municipal governments and school districts for years.)</p>
<p>We want to set out what we think are the key elements of any reasonable compromise:</p>
<p><strong>1. We need real recurring revenues.&nbsp;</strong></p>
<p>Speaker Turzai and the majority of Republicans in the House appear to still be in the grip of a fantasy that we can balance the budget without new taxes. But first, as we will see below, the alternatives to new taxes to balance the budget this year are mostly fantasies. And second, we need recurring revenues to deal with the long-term structural budget deficit. Citizens of this state are sick and tired of perpetual budget crisis in Harrisburg. And so are the credit rating agencies. There is going to be a credit down grade without at least $700 to 900 million in new recurring revenues. And that will mean tax increases to cover the added interest costs. Far better to raise revenues now then to have the state and local governments be forced to raise them later.&nbsp;</p>
<p>Some Republicans in both the House and the Senate say we should balance the budget with more cuts. But, first, the spending plan is already in place and September is not the time to change it. Second, there is no political will to reduce spending. Governor Wolf and the General Assembly actually went far in finding savings that enabled them to increase spending in education and human services, that is, areas where there is strong popular support for new spending. And, third, further cuts, particularly in education and environmental protection, will be disastrous for our future. It is absolutely clear that the economic future of not only our state as whole, but our kids, depends upon providing not only our kids but adults with more education and, training not less.&nbsp;</p>
<p><strong>2. Include a substantial severance tax.&nbsp;</strong></p>
<p>It’s long past time for Pennsylvanian to enact a severance tax on natural gas drilling. It is beyond obvious that a state with massive reserves of natural gas that is relatively inexpensive to extract can and should have a serious severance tax without reducing production. Natural gas drillers pay very little in corporate or personal income taxes and nothing in property taxes, and the effective rate of our impact fee is far below the severance taxes in other states.&nbsp;</p>
<p><strong>3. Stop improper raids on special funds and stealth budget cuts.</strong></p>
<p>The House bill reduced the proposed raid on special funds from the original $1.2 billion to about $600 million. This is an improvement. But the House bill takes too much from special funds that provide support for public transportation, environmental protection, public safety, and small business job creation. Raiding these funds in many cases amounts to a stealth budget cut for important public purposes. As we delve into the details of the proposal to raid special funds, it becomes ever more clear that the proponents of this approach simply haven’t recognized the difference between bank balances and budgets and do not understand that those balances mostly contain funds that are committed to public purposes and, where there are genuine surpluses, they mainly provide a necessary reserve fund. There are no doubt some balances that are genuinely too high, and we are not adverse to drawing them down. But the burden of proof is on those who claim that there are surplus funds.&nbsp;</p>
<p><strong>4. Do Not Rely on Phantom Funds.&nbsp;</strong></p>
<p>The House bill includes a number of phantom funds — projected revenues that are simply not likely to be come to fruition. There are place holders for funds that are supposed to come from legislation on gaming and liquor, that has not been enacted and most likely will not be enacted at all or in a way that generates revenues at the projected level. It includes $400 million in lapsed funds, double what the governor has identified and without any indication where the second $200 million will be found. It includes a $200 million raid on the JUA medical malpractice fund, even though that was blocked by the courts last year.&nbsp;</p>
<p>The citizens of Pennsylvania deserve, and the credit ratings agencies demand, a truly honest budget without phantom funds.&nbsp;</p>
<p><strong>5. Raise money on the tobacco settlement the right way.&nbsp;</strong></p>
<p>We have already pointed to our qualms about borrowing on tobacco settlement funds since this, like all other borrowing, deepens our budgetary problems in future years. But it is clear the General Assembly will not raise taxes to the level necessary to pay off the deficit from last year. So, if the tobacco settlement funds are to be used to raise the money to pay off the accumulated deficit, then it should be done in the right way. That means, first, doing it at least cost and risk to the state. The plan adopted by the House to sell the rights to tobacco settlement funds in order to avoid borrowing — even though that plan is borrowing under a another name — is likely to be more costly than the Senate plan. And it means, second, raising enough recurring revenue to insure that there are funds available for human services to make up for the tobacco settlement revenues that will be used to pay back bonds.&nbsp;</p>
<p><strong>6. Limit the impact of revenues on working people and the middle class.</strong></p>
<p>The Senate bill relied on new and higher gross receipts taxes to generate recurring revenues. If there is no alternative we can live with those taxes. But it is not ideal by any means because a larger burden falls on working people and the middle class. A small increase in the Personal Income Tax would be better.&nbsp;</p>
<p>Even better would be a small increase in the tax on income from wealth — business profits, dividends, capital gains, estates, royalties and gambling winnings. A small increase in the tax from 3.7% to 3.75% would raise $600 million. Over 50% of revenues would come from the top 1%</p>
<p><strong>&nbsp;5. Don’t trade revenues for bad environmental or human services provisions.&nbsp;</strong></p>
<p>Finally, we don't need a budget deal that includes environmental provisions that will threaten the safety of our air and water. The permitting process can be reformed and expedited without undermining state supervision of fracking and other activities that are potentially dangerous to our health.&nbsp;</p>
<p>A budget deal should also not include so-called reforms to Medicaid that impose onerous burdens on those who have a legitimate need for government help in securing health care. Work requirements for Medicaid recipients will have little effect on work effort because almost everyone who can work already does work. People already pay for part of the Medicaid benefits. Unless the state spends far more than it will save to ensure that no one is denied the healthcare to which they are entitled, these so-called reforms will not save the state any money.</p>
https://www.thirdandstate.org/2017/september/budget-solution-we-need#commentsState Budget and TaxesWed, 20 Sep 2017 13:59:25 +0000Marc Stier1594 at https://www.thirdandstate.orgWhat the PA Credit Downgrade Meanshttps://www.thirdandstate.org/2017/september/what-pa-credit-downgrade-means
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<div>The decision by Standard &amp; Poor’s to downgrade Pennsylvania’s credit rating should come as no surprise. There was ample warning by S&amp;P and other credit agencies, as well as by political observers&nbsp;<a href="https://www.thirdandstate.org/2017/july/sp-pa-snap-out-it" target="_blank">including us at PBPC</a>, that this would be the result of the continuing failure of Republicans in the General Assembly, and especially Speaker Turzai and his followers in the House, to raise sufficient recurring revenues to close state’s long-term structural deficit. Instead, year after year, budgets passed with Republican majorities have been balanced with one-year revenues, phantom funds, and other budgetary gimmicks.</div>
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<div>This year, even as the sword of a credit downgrade was hanging over the heads of the taxpayers of the state who will bear the burden of the increased taxes at every level of government from school districts and municipalities to counties to the entire state, Speaker Turzai ignored the danger. Even when a bipartisan majority in the Senate passed a tax code bill with recurring revenues that would remove the sword, Speaker Turzai refused to let the House consider it. The House spent weeks out of town. And when it returned, Speaker Turzai again ignored the warnings and allowed a group of back-benchers to drag the House through a search for fantasy 'surplus funds' that those with deep knowledge of the budget insisted did not exist. And then, the House passed a plan that not only raided special funds, but included other phantom revenues from liquor and gaming legislation that has not been, and most likely will not be enacted, phantom revenues from unspecified lapsed funds, and phantom revenues from a proposal that was rejected by the courts last year. Republican Senate President Pro Tempore Joe Scarnati summed it up best when he said, 'This is not governing; this is an embarrassment.'</div>
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<div>This credit down grade need not, and should not have happened. If the General Assembly had enacted Governor Wolf’s proposals in February 2017 to raise $1 billion from a severance tax on natural gas, corporate tax reform, and sales taxes on business-to-business purchases — none of which would place a severe burden on working and middle class Pennsylvanians — there would be no credit downgrade. If the General Assembly had enacted the modest personal income tax increase Governor Wolf proposed in February 2017, not only would the budget be balanced this year, but there would be almost no carryover deficit from last year.</div>
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<div>No doubt some Republican legislators and some advocates will say that the real cause of the budget deficit is overspending. And it is true that there is always two sides to a budget deficit. But&nbsp;<a href="https://www.thirdandstate.org/2017/august/evidently-you-can-make-stuff-commonwealth-foundation-and-house-gop-state-budget" target="_blank">spending has declined as share of state GDP for the last five years</a>, and the main reason for our structural deficit is&nbsp;<a href="https://www.thirdandstate.org/2017/april/our-upside-down-tax-system" target="_blank">cuts to corporate taxes and our upside-down tax system</a>. Moreover, every budget in the last five years has been passed with a majority of Republican votes — sometimes with Democratic support, sometimes not. No matter what the right-wing advocates say, a majority of Republican members of the General Assembly is simply unwilling to reduce state spending to the level necessary to balance the budget without new taxes — indeed they have taken credit for increased spending for education and human services. &nbsp;And the reason for their reluctance to cut spending is quite obvious — the public will not stand for it because investing in our communities is what's best for Pennsylvania.</div>
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<div>So what we have seen in the last five years is that right-wing legislators send press releases objecting to state spending totals, and refuse to fund the budget with recurring revenues, but never actually name, let alone enact the cuts necessary to balance the budget. While Governor Wolf produces a budget plan that does actually reduce spending, they produce lists of fantastical proposals and claims of 'waste, fraud, and abuse' that no one in their own caucuses even take seriously and that are never enacted despite overwhelming majorities in both houses of the General Assembly.</div>
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<div>Unfortunately for the citizens of the state, the sword has fallen today and we will all pay the price for the fundamentally irresponsible and dishonest approach to state budgeting taken by Speaker Turzai and his followers. Perhaps the clanging of the sword will awaken the many responsible Republican legislators in both the House and Senate and lead them to demand serious action to resolve the budget crisis quickly and reasonably. If they do so with dispatch, we can avoid further credit downgrades, and perhaps even see the state’s credit rating repaired before too long.</div>
https://www.thirdandstate.org/2017/september/what-pa-credit-downgrade-means#commentsState Budget and TaxesWed, 20 Sep 2017 11:36:31 +0000Marc Stier1593 at https://www.thirdandstate.orgSTATEMENT: On the Passage of the PA House GOP Revenue Planhttps://www.thirdandstate.org/2017/september/statement-passage-pa-house-gop-revenue-plan
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<div><em>HARRISBURG – Marc Stier, Director of the PA Budget and Policy Center, made the following statement on the passage of the House GOP revenue plan:</em></div>
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<div>"After a long debate that was mainly remarkable for the failure of House Republicans to adequately explain or defend their proposal to transfer $600 million from special funds into the General Fund, the Pennsylvania House of Representative enacted a revenue plan that, (1) includes zero recurring revenues, which means that the next fiscal year will begin with a deficit of over $1 billion, (2) is fundamentally unbalanced in that it includes many proposals that are unlikely to raise the revenues expected, including proposals that have been included in previous budgets but have never gone into effect, and (3) is a stealth cut in government spending on critical programs in public transportation, public safety, environmental protection and agriculture, small business, economic development, and other areas that are supported by the special funds the House has raided.</div>
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<!--break--><!--break--><p>"We expect both Senate Republicans and Democrats to rapidly reject this extremist, unbalanced, proposal.</p></div>
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<div>"The only good that comes out of today’s action is that the House has finally acted on some legislation to fund the budget, and this perhaps means they are ready to engage in serious negotiations among all four legislative caucuses and Governor Wolf that can finally result in a complete budget for fiscal year 2017-2018."</div>
https://www.thirdandstate.org/2017/september/statement-passage-pa-house-gop-revenue-plan#commentsState Budget and TaxesThu, 14 Sep 2017 02:11:43 +0000Marc Stier1592 at https://www.thirdandstate.orgThe PA House GOP Budget Plan to Raid Special Funds Explainedhttps://www.thirdandstate.org/2017/september/pa-house-gop-budget-plan-raid-special-funds-explained
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<p>The Pennsylvania House Republican plan to balance the budget by, among other things, raiding other state funds is something of a moving target. A new amendment Representative Moul (A03286) to House Bill 593 is the legislative vehicle in which elements of the plan will move to the floor of the House as early as today.</p>
<p>We want to take a step back and put the whole plan to use supposedly “surplus” money that is “sitting around doing nothing” into perspective. This plan rests on a fundamental confusion between bank balances and budgets, one that has played a role in the life of most married couples once or twice. And perhaps the easiest way to understand it is to consider a scenario not unfamiliar to most of us.</p>
<p style="padding-left: 30px;">One partner — I’m going to make him the husband in this version but it doesn't have to be — picks up a flyer from a big box store Buy and says, “Honey, look! That 70 inch 4k ultra-high definition TV we’ve always wanted is on a 20% off sale! We can get for only $3,000.”</p>
<p style="padding-left: 30px;">The wife says, “You mean the TV you always wanted is on sale. But it’s still $3,000 and we can’t afford it.”</p>
<p style="padding-left: 30px;">Husband: “Oh, you know you want to watch your romantic comedies on it.”</p>
<p style="padding-left: 30px;">Wife: “You mean your football games.”</p>
<p style="padding-left: 30px;">Husband: “Whatever…we can get it now.”</p>
<p style="padding-left: 30px;">Wife: “But we still can’t afford it."</p>
<p style="padding-left: 30px;">Husband leaves room and returns with his computer: “I’m logging onto our bank account now. I’m sure we have enough.”&nbsp;</p>
<p style="padding-left: 30px;">A minute later, he continued, “We’ve got $5,400 in our bank account. I told you we can afford it. The money is just sitting there.”</p>
<p style="padding-left: 30px;">Wife: “But we can’t use more than half of our savings when that money is budgeted for other things”</p>
<p style="padding-left: 30px;">Husband: “For what?”</p>
<p style="padding-left: 30px;">Wife: “Well, we need money for plane tickets to go to my sister’s wedding. That’s $900 or $1,400 when you include the hotel room. The dentist sent us a proposal for Little Johnny’s braces and they are going to cost $2,500. And we budgeted $1,500 to fix the back steps before someone hurts themselves. That’s $5,400 right there. It doesn’t leave enough to spend more on anything else let alone $3,000 on a TV.”</p>
<p style="padding-left: 30px;">The husband retreats in silence.</p>
<p>The husband in this little drama is confusing the family bank balance with the family budget. The bank balance is how much money the family has saved. The budget reconciles how much they plan to spend over the course of the year with how much income and savings they have. And in my little scenario, the family’s bank balance is already committed in their budget for certain purposes. Money that the husband thinks is just lying around doing nothing (except earning interest) is already committed.</p>
<p>The 17 Republicans who put forward their budget plan yesterday are making exactly the same mistake. It appears that they came up with their plan by working almost entirely with bank balances, ignoring the detailed spending plans for each of the special funds they seek to raid. They used the new Treasury portal to find large sums of money, “just sitting around doing nothing” and thought to themselves, “voila we can do what we always wanted and balance the budget without raising taxes or cutting any government programs.”</p>
<p>But, leaving aside the problem that&nbsp;<strong>this is only a one-year fix and that next year there won’t be any more funds to raid to pay for what the ongoing costs of the level of government House Republicans voted for this year</strong>, Representative Moul and his allies have it fundamentally wrong. The money saved in the special fund accounts is <strong>committed to the purposes for which the special funds were created</strong>.&nbsp;Raiding those funds means that the government will do less than planned in all the areas in which the special funds operate.</p>
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<li>There are $507.5 million in cuts to&nbsp;<strong>transportation programs</strong>, from the Public Transportation Fund, the Multi-modal Transportation Fund and the PA Infrastructure bank.</li>
<li>There are $379 million in cuts to&nbsp;<strong>environmental and agricultural programs</strong>, even after the reduction in the cut to the Keystone Recreation, Park and Conservation Fund. These include raids on the Hazardous Sites Cleanup Fund, the Agricultural Conservation Easement Purchase Fund, the Industrial Sites Cleanup Fund. The latest version of the Moul plan ups the ante in this area by increasing the raid on the Recycling Fund from $75 million to $104 million. (We are assuming that the reduction in the cut to the Keystone Recreation, Park and Conservation Fund from $100 million to $100,000 is a typographical error. If not then the total in this category is $279 million.)</li>
<li>There are $122.7 million in cuts to&nbsp;<strong>business and economic development programs</strong>, with raids on the Machinery and Equipment Loan Fund, the Small Business First Fund, the CFA New PA Venture Capital Fund, the Ben Franklin Tech Development Fund (which is increased from $12 million to $75 million), and the municipalities Financial Recovery Revolving Aid Fund.</li>
<li>There are $94 million in cuts to&nbsp;<strong>public safety programs</strong>&nbsp;with raids on the 911 Fund, the Volunteer Companies Loan Fund, the Manufacturing Fund, and the Justice Reinvestment Fund.</li>
<li>There are $31.2 million in cuts to&nbsp;<strong>gaming-related programs</strong>&nbsp;including the Racing Fund and the Compulsive and Problem Gambling Fund.</li>
<li>There is also, in the Moul Amendment, a new proposal to cut&nbsp;<strong>health care programs</strong>&nbsp;by increasing the raid on the Tobacco Settlement Fund from $14.8 million to $120 million. There are no provisions to replace these funds, which pay all of the costs for tobacco use prevention and cessation, CURE health research, and hospital uncompensated care payments and part of the costs for the Medicaid entitlement programs that provide nursing facility care, home- and community-based services for seniors, and medical assistance for workers with disabilities. Those Medicaid programs earn federal matching funds, which would be lost if the tobacco settlement funds are not replaced.&nbsp;</li>
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<p>No matter what Representative Moul and his allies assert, these raids on the special funds are or will lead to real reductions in government programs —&nbsp;programs that both Democrats and Republicans have supported. Perhaps he and others don’t support them any more. If so, they should say so and hold a public debate, in committee and on the floor of the House, about the value of these programs.</p>
<p style="mso-pagination: none; page-break-after: auto; mso-list: none;">But it is pretty shocking that a group of representatives who say they want to bring a so-called shadow budget into the light are making these stealth cuts to vital government programs while denying that this is what they are doing.</p>
https://www.thirdandstate.org/2017/september/pa-house-gop-budget-plan-raid-special-funds-explained#commentsState Budget and TaxesTue, 12 Sep 2017 13:46:07 +0000Marc Stier1591 at https://www.thirdandstate.orgWhere the Budget Standshttps://www.thirdandstate.org/2017/september/where-budget-stands
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<p>As legislators return to Harrisburg after a far too long vacation, it’s time to take stock of the state of the unfinished budget.</p>
<p>In early July, the General Assembly enacted a budget that took many step forwards. It provided new funding for child care and pre-K education, for K-12 education, for the Pennsylvania System of Higher Education; for those who are intellectually disabled and face long waiting lists to get services; and for those for those who suffer from opioid addiction and mental illness.</p>
<p>Yet, as of today, the General Assembly has not managed to pass a funding plan to pay either the budget for the current year, which remains about $900 million underfunded, or for the deficit of $1.5 billion accumulated last year.</p>
<p>Weeks went by after the appropriations bill was passed with no action, but finally the Senate took a step forward. With strong bipartisan support it passed a revenue plan that was imperfect in many ways but got two big things right. Just as Republicans finally did in Kansas and Illinois, Republicans in the PA Senate recognized that we can’t cut our way out of budget deficits. While Democrats and Republicans may still disagree about how much public investment we need, there is broad agreement that government spending, especially for education and training, is critical to our prosperity and that government spending for human services is critical to our humanity. Republicans and Democrats in the Senate agreed that new revenues were needed to balance the budget. And they also, finally, embraced a severance tax on natural gas drilling, albeint one that was too small.</p>
<p>We would have not raised the Gross Receipts Taxes in the Senate Tax Code bill and would have also rejected some of its environmental provisions, but we were heartened to see a bipartisan agreement to fund the budget in one chamber of the General Assembly, and we waited for the other chamber to act —&nbsp;and hopefully improve —&nbsp;the tax code bill.</p>
<p>We waited for the House to act. And waited. And waited. And waited some more.</p>
<p>And nothing happened.</p>
<p>So here we are, on September 11, with the House coming back into session less than a week before some of the consequences of their inaction may soon be felt.</p>
<p>One consequence is that the credit agencies will down-grade the bonds of not just the state, but of county and local governments and school districts across Pennsylvania as well. That could well cost taxpayers hundreds of millions of dollars over the next few years.</p>
<p>The second is that the General Fund will run out of money. This is projected to happen as soon as Friday. Because the state can’t spend money it doesn’t have, the Governor is going to have to continue reserving funds — that is holding back spending that the General Assembly appropriated for this fiscal year. Indeed, Governor Wolf has already reserved almost $200 million. But now he is going to have to go far deeper into the enacted budget to find savings.</p>
<p>There are only a few places that can be cut, as most state spending is mandated by contract, law, or federal regulations. Contract regulates what we pay state employees. Laws —&nbsp;and good sense —&nbsp;prohibit us from doing something like opening the prison doors and letting convicts walk out. And federal regulations prevent us from cutting most Medicaid spending for health care or long-term elderly care without losing billions of federal funds.</p>
<p>There are only two places where deep cuts can be made: education and non-mandated human services for the mentally ill, unemployed, disabled, and unemployed. Closing the deficit for last year and this year would ultimately require about a 12% reduction in these areas. That would mean a cut in state aid to schools of roughly $1 billion.</p>
<p>We know what that looks like. We went through it five years ago and have barely recovered. It means that 20,000 teachers, guidance counselors, and librarians — if there are any left — could lose their jobs. It means that science and technology and music and art classes could end. It means that communities in every part of the state will suffer economically as teachers and other state workers lose their jobs.</p>
<p>The Republicans in the House tell us they have had a truly miraculous revelation that will enable us to avoid all these consequences without raising taxes on anyone. They are going to raid all the special funds that, they say, have accumulated huge surpluses that are just lying around.</p>
<p><a href="https://www.pennbpc.org/why-we-shouldn%E2%80%99t-raid-special-funds-balance-general-fund" target="_blank">As we’ve pointed out</a>, this plan is, at best, the work of amateur back-benchers who don’t really understand the budget, or is, at worst, a deliberate attempt to mislead the public. Contrary to what the Republicans who dreamed up this plan say, their plan will substantially reduce state spending not just for the $200 million the Governor has already reserved and for the state-related colleges and universities they do not fund, but also as a result of their proposal to raid special funds that support a great of deal investment in public transit, environmental protection, and parks and recreation, and other areas.</p>
<p>As Representatives and Senators look more closely at the details of this plan, we expect it will sink of its own weight.</p>
<p>So the budget impasse has now become a budget crisis. We can’t be sure when the worst consequences we’ve outlined will come to fruition. A credit downgrade could come next week or next month. Deep cuts in educations spending may be necessary in two weeks or two months. But no one should doubt that if Speaker Turzai doesn’t bring a revenue bill to the floor that makes it possible to complete the bipartisan compromise on funding the budget sooner rather than later, everyone in Pennsylvania is going to suffer the consequences.</p>
https://www.thirdandstate.org/2017/september/where-budget-stands#commentsState Budget and TaxesMon, 11 Sep 2017 21:06:29 +0000Marc Stier1590 at https://www.thirdandstate.orgSome bodice-ripping prose from the State of Working Pennsylvania you may have missed!https://www.thirdandstate.org/2017/september/some-bodice-ripping-prose-state-working-pennsylvania-you-may-have-missed
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<p>Ok, a bodice-ripping romance novel is not how anyone would describe the <em>State of Working Pennsylvania,</em> but now that we have your attention hopefully you will continue reading about four key decision points facing Pennsylvania policymakers considering changing Pennsylvania’s Minimum Wage Act: subminimum wages, local preemption, indexing, and wage theft.</p>
<h2><a name="_Toc491890670"></a>Subminimum Wages</h2>
<p>In Pennsylvania, employers of workers that customarily receive tips are required to pay their tipped workers a base wage of $2.83 per hour, provided employees’ weekly income from tips plus their base wage would bring their hourly rate to $7.25 – the current minimum wage. Tipped workers in states like Pennsylvania face higher <a href="http://www.epi.org/publication/waiting-for-change-tipped-minimum-wage/">rates of poverty and a greater reliance on public assistance than tipped workers in states that do not have a tipped subminimum wage</a>. For this reason, we recommend streamlining Pennsylvania’s minimum wage law by phasing out the tipped minimum wage by 2025. The Economic Policy Institute estimates that raising the tipped minimum in Pennsylvania to $5.25 while boosting the minimum wage to $9.00 by next July would boost the wages of 161,688 tipped workers. Two other subminimum wages that policymakers sometimes propose include subminimum wages for younger workers or subminimum wages for workers in small business. These provisions generally do more harm than good by giving employers an incentive to discriminate in hiring by age or by subsidizing inefficient firms.&nbsp;</p>
<h2><a name="_Toc491890671"></a>Local Preemption</h2>
<p>As part of a compromise to raise the state minimum wage to $7.15 an hour in 2006, local governments in Pennsylvania were preempted from establishing a minimum wage higher than the state minimum wage. At the time, Pennsylvania was only one of 10 states to preempt local minimum wage law. Since then, preemption has blossomed nationwide with 25 states preempting higher local minimum wages and a <a href="https://goo.gl/QzsUqY">growing number of states using preemption to roll back local efforts to expand paid sick days and fair scheduling laws</a>. We recommend an end to preemption to allow higher-wage, higher-cost-of-living regions in Pennsylvania to establish minimum wage levels more in line with the local pay levels and the cost of living.&nbsp;</p>
<p>After determining the level of the minimum wage, the single most important technical issue is whether the wage is adjusted annually to reflect changes in the demand for labor.&nbsp;</p>
<p>Currently, 18 states, including New York, New Jersey, Ohio, and the District of Columbia, adjust the minimum wage annually to reflect changes in consumer prices. If after raising the minimum wage to $7.15 in 2007 had Pennsylvania’s minimum wage been adjusted annually based on changes in the Consumer Price Index (CPI) it would be $8.31 per hour today (Table 10).</p>
<p>The <a href="https://www.congress.gov/bill/115th-congress/senate-bill/1242">Raise the Wage Act of 2017</a> introduced in the U.S. Senate this May proposes indexing the minimum wage using the median wage. The advantage of using the median wage is that it more directly reflects conditions in labor markets than consumer prices, where volatile components like food and energy prices tend to be driven by economic factors unrelated to labor market conditions (<a href="http://equitablegrowth.org/research-analysis/bolstering-bottom-indexing-minimum-wage-median-wage/">see this paper for more</a>). Adjusting the minimum wage set at $7.15 in 2007 for changes in the median wage for full-time full-year workers in Pennsylvania since then would lift the minimum wage in 2017 to $9.34 per hour.</p>
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<h2><a name="_Toc491890673"></a>Wage Theft</h2>
<p>Raising the minimum wage is not enough: for many workers in Pennsylvania, the state needs to do more to combat wage theft. Community Legal Services of Philadelphia reports <a href="https://clsphila.org/learn-about-issues/testimony-increasing-minimum-wage-and-combating-wage-theft">over a hundred cases each year</a> of clients whose employers simply did not pay them or paid them less than the legal minimum. The Economic Policy Institute, using data from the Current Population Survey, finds <a href="http://www.epi.org/publication/employers-steal-billions-from-workers-paychecks-each-year-survey-data-show-millions-of-workers-are-paid-less-than-the-minimum-wage-at-significant-cost-to-taxpayers-and-state-economies/">107,000 Pennsylvania workers or 10% of the minimum wage eligible workforce were victims of wage theft</a>. The EPI analysis finds that Pennsylvania employers that commit wage theft are stealing just over a third (34.6%) of the wages to which their victims are legally entitled – a bigger share than in any of the other 10 large states studied by EPI.</p>
<p class="MsoNormal">To combat wage theft in Pennsylvania, Community Legal Services of Philadelphia <a href="https://clsphila.org/learn-about-issues/testimony-importance-combatting-wage-theft">recommends boosting the penalties for wage theft violations, and streamlined and better-funded enforcement of existing laws by the Pennsylvania Department of Labor and Industry</a>. Our “<a href="http://bit.ly/2x6jlI0">Agenda to Raise Pennsylvania’s Pay</a>” also recommends clamping down on wage theft through more effective, strategic, and industry-specific enforcement.</p>
https://www.thirdandstate.org/2017/september/some-bodice-ripping-prose-state-working-pennsylvania-you-may-have-missed#commentsMinimum WageState of Working PAFri, 08 Sep 2017 13:26:39 +0000Mark Price1589 at https://www.thirdandstate.orgPay No Attention to the Budget Cuts Behind the Curtain: the PA House GOP Budget Planhttps://www.thirdandstate.org/2017/september/pay-no-attention-budget-cuts-behind-curtain-pa-house-gop-budget-plan
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<p>For the last few weeks, we have been told a Republican plan to balance the budget was coming, one that would, almost miraculously, come up with more than $2 billion without raising taxes or cutting any public programs simply by transferring “surplus funds” that were “not doing anything” into the General Fund.</p>
<p><a href="https://www.thirdandstate.org/2017/august/let’s-not-let-cranky-uncle-mike-raid-state-budget">We knew and said</a> that this plan was, at best, a one year fix that would not do anything to reduce the long term structural deficit in the state budget. And in the same piece we strongly suspected that it was based on some false assumptions about why there are numerous state special funds and why, at certain points of the year, they run a surplus.</p>
<p>But we were not prepared for what we heard today when the program was revealed and the whole effort was shown to be a sham of <em>Wizard of Oz</em> proportions.</p>
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<p>This plan is, as we assumed, a one-year fix. But it is a one-year fix that is accomplished by a huge reduction in the state budget, partly in the General Fund, but mostly in the special funds. Many, if not most, of the “fund transfers” the Republicans propose are larger than both beginning or ending balances of the special funds in question, which means that their plan cuts spending by the special funds that the General Assembly has previously approved.</p>
<p>The House Republican plan thus offers us deep cuts to many important government programs pretending to be a series of funds transfers. Among them are cuts to public transportation, aid to small businesses, environmental programs including recycling and hazardous waste clean-up, as well as funds for parks, recreation centers, and historic sites.</p>
<p>Rather than openly debate these programs, this group of Republican House members have called for cutting them without acknowledging that this is, in fact, their plan.&nbsp;</p>
<p>We will have more details about the specific problems in the Republican proposal later. Here we just want to point to some examples of the disparities between what the Republicans claim about their plan and the truth of the matter:</p>
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<li>The proposal raids $30 million from the&nbsp;PA Infrastructure Bank. This will lead to a reduction in loans for qualified transportation projects of at least $17.5 million.</li>
<li>The proposal raids $25 million from the&nbsp;Small Business First Fund, which provides loans to small businesses to help them comply with environmental regulations or adjust to defense cutback. The balance plus new revenues from principal and interest repayments only totals $19 million. This transfer will basically end this state program.</li>
<li>The proposal raids $75 million from the&nbsp;Recycling Fund, which funds “recycling and planning grants, market and waste minimization studies, and public information and education activities” and also finances the cleanup of illegally deposited waste on state forest. This will lead to at least a $25 million reduction in state spending for these purposes.</li>
<li>The proposal raids $357 million from the&nbsp;Public Transportation Trust Fund, which receives revenue from Turnpike tolls and other sources and provides dedicated operating and capital funding for public transit. This will necessarily require about a $100 million reduction in expenditures from the Fund.</li>
<li>The proposal raids $50 million from the&nbsp;Hazardous Site Clean Up Fund, which finances cleanup and restoration of abandoned hazardous waste sides. This will require a reduction of $11 million in spending this year.</li>
<li>The proposal raids $100 million from&nbsp;Keystone Recreation Park and Conservation Fund&nbsp;that comes from dedicated bonds as well as tax revenues, which funds acquisitions, improvements and expansions of commonwealth and community parks, recreation facilities, historic sites, zoos, public libraries, nature preserves and wildlife habitats. This will eliminate the $95 million in spending from this fund this year.</li>
<li>The proposal raids $25 million from the&nbsp;Banking Fund, which receives funds from fees, assessments, charges and penalties collected or recovered from persons, firms, corporations or associations under the supervision of the Department of Banking Securities. While here the Republicans may have found a real surplus, there is a reason for it: to have funds available in case a of seizure or liquidation of a financial institution, association or credit union. It is good government to maintain this surplus.</li>
<li>The proposal raids $120 million from the&nbsp;Multimodal Transportation Fund, which receives revenue from Turnpike tolls, motor vehicle fees, and the Oil Company Franchise Tax in order to fund passenger rail, rail freight, ports and waterways, aviation, bicycle and pedestrian facilities, roads and bridge. This would eliminate $90 million in state spending.</li>
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<p>There are other examples of budget cuts masquerading as the transfer of surplus funds. And there are legal and constitutional problems in many of the proposals that raid funds derived from public debt approved by the voters for one particular purpose.&nbsp;<br /><br />And, on top of the budget cuts portrayed as "funds transfers," the Republican proposal includes two other hidden budget cuts. The first is the $189 million the Governor has put in reserve until the budget is funded. This is spending that was part of the budget many of these Republicans voted for in July. They thus propose converting a temporary action by the Governor into a permanent budget cut. The second is the roughly doubling of savings expected from lapsed funds. In many cases, funds that have not been spent in a budget year are spent in the next year for purposes designated by the General Assembly.<br /><br />All told, the Republican plan to solve our budget problems without any pain turns out to be a total mirage, conjured up by some Wizards of Budgetary Legerdemain in the House Republican Caucus. And even i<span style="display: inline !important; float: none; background-color: transparent; color: #000000; font-family: Verdana,Arial,Helvetica,sans-serif; font-size: 10px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; -webkit-text-stroke-width: 0px; white-space: normal; word-spacing: 0px;">f every fund transfer proposed by the Republican back-benchers today were Constitutional and legal, and even if they had no impact on the commitments made by the General Assembly to provide funding for public purposes, this one-time transfer will provide almost no recurring revenues to support the state’s on-going commitments. It would leave us facing a deep deficit next year — one that would grow deeper every subsequent year.</span><br /><br /> It is time for sensible members of the caucus to put this nonsense aside and to recognize that there is no painless solution to the Pennsylvania budget deficit and join Democrats and Senate Republicans in enacting new, recurring revenues to balance the budget.</p>
https://www.thirdandstate.org/2017/september/pay-no-attention-budget-cuts-behind-curtain-pa-house-gop-budget-plan#commentsState Budget and TaxesTue, 05 Sep 2017 20:00:50 +0000Marc Stier1588 at https://www.thirdandstate.orgState of Working Pennsylvania 2017https://www.thirdandstate.org/2017/september/state-working-pennsylvania-2017
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<p>On Thursday we released <a href="https://www.keystoneresearch.org/publications/research/state-working-pennsylvania-2017">the 22<sup>nd</sup> edition of the State of Working Pennsylvania</a> in which we review the current state of the economy with an eye towards changes in the standard of living for working families in the commonwealth. One of the new pieces of information we present in this year’s report, with the help of the crack staff at the Economic Policy Institute, is the median wage for full-time full-year workers in Pennsylvania since 1968. In that year in Pennsylvania the typical worker had hourly earnings of $3.15 per hour, and the minimum wage was $1.60 per hour or 51% of the median wage. Flash forward to 2017 and we estimate the typical full-time full year worker took home $22.43 per hour while the minimum wage is $7.25 or 32% of the median.</p>
<p>This decline in the earnings of minimum wage workers relative to the median for full-time full-year workers reflects the fact that policymakers since 1968 have raised the minimum wage less often, and when they have raised it they have not raised it enough to make up for the ground the minimum wage has lost relative to the median between increases. You can see this problem play out in the range of proposals to raise the minimum wage in Pennsylvania recently. Some policymakers have put forward proposals to raise the minimum wage to just shy of $9 per hour, which would raise the minimum wage back roughly to where it was in 2006 when the minimum wage was increased to $7.15. In contrast, a $12 minimum wage would almost get the minimum wage back to where it was in 1968 and a $15 per hour minimum wage by 2024, which we endorse, would push the minimum just beyond that previous peak and set the minimum at 57% of the median wage.</p>
<p>As we point out in this year’s report, since 2014 the minimum wage has increased in every state neighboring Pennsylvania by an average of 24% with further increases already scheduled in four of six states. As a result, wages for the bottom 10% of workers grew much faster in the region than in Pennsylvania. There is no evidence that these increases have slowed growth even in the industries that rely most heavily on low-wage workers.</p>
<p>It’s been more than a decade since legislation to raise the minimum wage has moved to the floor of the state House or state Senate for an up or down vote. A vote on this issue is long overdue.</p>
<p><em><strong>Download the full State of Working Pennsylvania 2017 <a href="https://www.keystoneresearch.org/sites/default/files/KRC_SWP%202017_Final.pdf">here</a> and read our “<a href="http://bit.ly/2x6jlI0">Agenda to Raise Pennsylvania’s Pay</a>”&nbsp;</strong></em></p>
https://www.thirdandstate.org/2017/september/state-working-pennsylvania-2017#commentsEconomyState of Working PAFri, 01 Sep 2017 20:51:32 +0000Mark Price1587 at https://www.thirdandstate.orgLet’s Not Let Cranky Uncle Mike Raid the State Budgethttps://www.thirdandstate.org/2017/august/let%E2%80%99s-not-let-cranky-uncle-mike-raid-state-budget
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<p>Last November we elected a President who reminds many of us of a cranky uncle who sits at the far end of the Thanksgiving or Christmas table, muttering under his breath about the “damn government” and “wasted taxes” and, quite often, “those people who cause all the trouble.” When you try to engage him in discussion, you find that he has a ready – and extremely simplistic – answer to every question, one that is lacking in any detailed understanding of what government actually does and that assumes that “it’s very simple to do x or y” if not for conniving politicians.</p>
<p>Right now, some Republican members of the House of Representatives in Pennsylvania, <a href="https://www.commonwealthfoundation.org/policyblog/detail/reducing-the-states-cash-stockpile-can-help-balance-the-budget">with the support of outside advocates</a>, are readying a plan to borrow massively, perhaps up to more than $2 billion, from many of the 100 or so special funds that, along with the General Fund, are part of the state budget. Their justification for doing so is that, at the end of each year, many of these funds have a surplus. So it seems easy enough to shift those surpluses – money they are quick to say is “just sitting there not doing anything” – into the General Fund.</p>
<p>Why is this a bad idea? There are two general reasons.</p>
<p><!--break--><!--break--></p><p>First, raiding special funds to fill the hole in the General Fund can only provide, at best, a one-year fix for the state’s persistent budget deficits. Without new recurring revenues, a deficit will return next year.</p>
<p>And second, money accumulates in the special funds for a number of good reasons. The money raided from these funds almost always must be repaid with interest. Thus, the state budget deficit will get deeper in future years.</p>
<p>Beyond these two general points, the various special funds finish the fiscal year with a surplus for a number of good reasons. <a href="https://www.pennbpc.org/why-we-shouldn%E2%80%99t-raid-special-funds-balance-general-fund" target="_blank"><strong>You can read about that in detail in our recent paper here</strong></a>. But we can quickly examine them by looking at some specific examples.</p>
<p>Take the <strong>Coal and Clay Mine Subsidence Insurance Fund</strong>. It receives revenues from premiums paid by policyholders for subsidence insurance and it makes payments to homeowners in mining areas whose homes have been damaged by subsidence. Setting up this fund was meant, among other things, to embrace the conservative principle that the burden for covering subsidence damage should fall on those most at risk for it, not the general public. Like any other insurance program, the fund keeps a balance so that it will have the funds to cover large losses in any year. If the $105 million accumulating in the fund – and earning interest – is used to balance the General Fund budget, monies paid by homeowners for this insurance won’t be available to pay for a major disaster.</p>
<p>Or take the <strong>Fish Fund</strong>, which receives revenues from fishing licenses and fines and the occasional federal contribution. The state promised to use those license fees to administer state fishing programs and to sustain aquatic life in the state. And, again, by drawing revenue for the fund mostly from those who fish, the general public does not have to pay for programs that benefit a much smaller group. The Fish Fund has a balance at the end of the year of about $60 million in part because expenditures take place in the summer months, early in the fiscal year before receipt of funds for that year. In addition, the costs of these programs vary from year to year depending upon weather and other conditions.</p>
<p>Or take the <strong>Growing Greener Bond Fund</strong>, which was established to receive $625 million in bond sales authorized by a vote of Pennsylvanians. Those funds are dedicated to various environmental projects such as watershed preservation, mine drainage remediation, flood control projects, brownfield remediation, and improvements in state parks. The fund’s balance is gradually being drawn down and now stands at $21 million, although it was far higher a few years ago. Bond funds like this one often have a high balance initially, as bonds are sold before the projects they are meant to fund are planned and completed. Raiding these funds inappropriately takes money dedicated to one purpose and uses it for another.</p>
<p>Or take the <strong>Persian Gulf Conflict Veterans’ Compensation Bond Fund</strong>, which was established to distribute funds from a $20 million bond fund approved by the voters of Pennsylvania to compensate Persian Gulf Veterans. If this fund is raided to support the General Fund, money may not be available to Persian Gulf Veterans this year.</p>
<p>Or how about one of the funds with a large end-of-year balance, the <strong>Property Tax Relief Fund,</strong> which receives revenue from casinos and distributes the money to reduce local property taxes (and wage taxes in Philadelphia). At the start of the fiscal year, it has a balance of almost $500 million. Why shouldn’t that “surplus money” be transferred to the General Fund? Well, the balance is kept so that the fund can makes payments in August and October each year to local governments and school districts before revenues are received from the casinos. If the General Assembly raids this fund to balance the General Fund, payments to local school may be delayed.</p>
<p>And, finally, consider the<strong> Public Transportation Trust Fund</strong>, which provides dedicated funding for public transportation systems all over the state – not only the big transit systems in Philadelphia and Pittsburgh, but the smaller ones in 12 other cities. The Public Transportation Trust Fund receives revenues from a portion of Pennsylvania Turnpike Tolls, motor vehicle funds, vehicle code fees, and other sources. And it provides both operating support – that is subsidies to make public transit more affordable – and capital funds for such things as new buses, new transit cars, and track upgrades. &nbsp;Over the course of a year, about $1.5 billion flows into and out of the fund and, at the end of the fiscal year, it keeps a balance of about $250 million. (While the monies for this fund come from drivers, not public transit users, they do benefit because public transit reduces traffic on roads in our major and small cities.)</p>
<p>Why does the Public Transportation Trust Fund need to keep a balance? In part for the same reason as the Property Tax Relief Fund, to ensure that payments can be made early in the fiscal year before receipts come in. And, in part, because the fund pays for large capital projects. What will we tell transportation agencies around the state when a bill comes due for new buses and there is no money to pay for them?</p>
<p>There are many other state funds, most of which are quite small, and many of which are basically just bank accounts to receive and pay out funds for specific purposes. If one were to go through the larger funds one by one, you would find one or another good reason that they keep a positive balance in their account. We’ve seen many of those reasons in reviewing these funds:</p>
<ul type="disc">
<li>To ensure that funds from bond issues or taxes dedicated to specific purposes only goes to those purposes.</li>
<li>To ensure that certain government activities are paid for not by (or not mainly by) the public as a whole, but by those who most benefit from them.</li>
<li>To have a reserve to make payments for specific purposes before the revenues dedicated to those purposes for that fiscal year are received.</li>
<li>To keep a reserve in case extraordinary expenses arise in one year.</li>
<li>To hold funds for major capital expenses – which do not come due at fixed intervals – until they are needed.</li>
</ul>
<p>While calling these funds part of the “shadow budget” is a nice rhetorical move to convince people that politicians in Harrisburg have done something wrong in creating them, it’s also entirely misleading claim. There is no mystery about these special funds.</p>
<p>The plan to raid the “shadow budget” is based on a false understanding of how the state special funds work. And, more importantly, it is an attempt to do on steroids what Harrisburg has done far too often in the last decade, balance the General Fund budget by borrowing money from these funds.</p>
<p>Our cranky uncles are sometimes entertaining, especially when we are young. Their iconoclasm can be bracing and thought provoking. But as we get older, most of us conclude that they are far too cynical and uniformed to be taken seriously. Their simple solutions are almost always based on false premises and a lack of information. Most of us would never dream of turning our government over to our cranky, blustering, know-nothing uncles.</p>
<p>It sometimes seems to both Democrats and Republicans that we did that in electing the current president of the United States. And that’s one more good reason to be cautious in turning over our state budget to cranky Uncle Mike Turzai and his simple-minded solution for our current budget crisis.</p>
<p><strong><a href="https://www.pennbpc.org/why-we-shouldn%E2%80%99t-raid-special-funds-balance-general-fund" target="_blank">Read the full policy brief here.</a></strong></p>
https://www.thirdandstate.org/2017/august/let%E2%80%99s-not-let-cranky-uncle-mike-raid-state-budget#commentsState Budget and TaxesMon, 28 Aug 2017 20:11:59 +0000Marc Stier1586 at https://www.thirdandstate.org